On 1 July 2023, your company acquired a machine for $103,000 on credit and decided to depreciate it for 25 years with no residual amount. The credit was taken from a local bank that charges 4.2% per annum with payments every year on 30 June. Assume that the fair values of this asset were:

Date Fair Value

1/7/2023 $105,000

30/11/2023 $98,000

30/6/2024 $80,000

a) Using the revaluation model, prepare the relevant journal entries from the date of acquisition to 30 June 2024.

b) You have been asked to assess the use of fair value concerning the machine of question in part a. You found that there is no principal market for this machine in Australia. The most advantageous market is overseas, which is not always followed by the accounting department. You also found that the fair value calculation is considered at level 3. The increase in expected price in the last year was due to specific political and economic matters. Your company is the only Australian company using this machine manufactured in Ukraine. Please note that Australia is having some level of inflation (consider using inflation in your arguments). Additionally, Ukraine is under a war. These two facts (inflation and war) can affect your evaluation. Ukraine cannot produce or send this machine on short notice, which created a huge demand for this type of machine in Australia.

Critically evaluate this scenario considering your opinion about the use of fair value and the related Australian accounting regulation (standards and conceptual framework)